Electricity prices expected to continue to rise even with surplus generation

KARACHI: Pakistan expects to have surplus power by 2020 due to the continuous expansion of new generation facilities ahead of actual domestic demand but the electricity prices for general consumers are also expected to go up, said electricity experts.

They said a sharp increase in number of independent power producers (IPPs) may create a situation of huge surplus power in the country however the electricity consumers will have to bear additional cost due to costlier electricity from IPPs as the National Electric Power Regulatory Authority (Nepra) has been accommodating the inefficiencies of the power sector through an increased electricity tariff.

Electricity expert Anwar Kamal Law Associates (AKLA) said that the tariff for the power plants should be determined on the basis of “Take and Pay” in competitive mode with no responsibility for the supply of fuel on the power purchaser. “Instead of setting up new power plants, which are comparatively costlier and that too in haste with terms and condition dictated by the investor, effort should be made to utilize the available power generation capacity to its full and then go for setting up new power plants as per Pakistan’s real need”.

If careful steps are not taken, AKLA see a serious situation in the power sector three to four years down the line on account of surplus capacity, the situation will be more serious because taking advantage of lower fuel prices.

It also requested the Nepra to calculate the financial loss that the power sector and the electricity consumers are suffering and have to suffer the next 25 years due to purchase of electricity from costlier power plants while leaving aside the cheaper electricity available in the generation basket of Central Power Purchasing Agency (CPPA-G).

It is being reported that more than 11000 MW generation capacity will be added in the national system by the end of 2018. Therefore, AKLA drew the attention of the power regulator to its policy for the development of Electricity Market by 2017. NEPRA encourages direct purchases of electricity in its Supply of Electric Power Regulations, 2015. In this regard many industrial estates in Punjab and Khyber Pakhtunkhawa have published ‘Expression of Interest’ for purchase of Power from IPPs. If such a move materializes, it will mean that the demand in the CPPA system may go down. If this happens, how CPPA will be able to pay the IPPs with which it has executed long term PPAs on ‘Take or Pay’ basis and that too for a period of 25 to 30 years, AKLA questioned.

On the other hand, the CPPA-G said that it has carried out an initial assessment with regards to the supply-demand situation in the future wherein it has segregated all generation plan into two blocks; Committed and non-Committed.